A 73-page inspection report on the controversial Albuquerque Rapid Transit project recommends the city avoid funding projects in the future that might not receive federal reimbursement and that city leaders exercise caution in using bond funds earmarked for other projects.

The report, conducted by city Inspector General David Harper and released Thursday, examined processes, procedures, legislation and rules applied to the $135 million project to transform Central Avenue via electric-powered rapid transit buses with dedicated bus lanes and median stations.

Mayor Tim Keller said in a statement: “The report is a helpful summary of how they got into this mess. The findings show why it’s taking an extraordinary amount of time and effort to clean it up, so the transportation system works for the people of our city.”

The city has applied for $75 million in grant funding from the Federal Transit Administration Small Starts program, as well as several other FTA grants. But the city has not received promises of funding from the federal agency.

The report warns that if the federal government does not provide funding for the project, it would have a “severe impact on the city’s financial health.”

If that were to happen, options available would be to divert existing capital improvement project funds, which would require projects already planned and in initial stages to be canceled or deferred; issue new debt through revenue or general obligations bonds; or a hybrid of the two, according to the report.

City Councilor Ken Sanchez said Thursday that the council approved a resolution he sponsored in 2016 calling for the administration to provide contingency operation and funding plans through fiscal year 2021 in the event a federal grant did not materialize.

“From day one, the council was concerned about not receiving the federal money for the project in advance,” he said.

The resolution suggested that contingency options could include increasing fares, adjusting pass programs or absorbing the growth increment in gross receipts.

According to the report, there is no contingency plan in the event federal funding is unavailable.

The report also found that the city has funded construction, in part, using money from general obligation bonds that taxpayers intended to be used for other projects based on the bond descriptions at polling booths.

The city’s bond counsel advised that bond funds need to be used for the intended projects within three years per IRS rules.

Recommendations include exercising caution when using funds from legislation established by voters and avoiding situations where there is unreasonable risk when using funds restricted for specific purpose.

The report recommended the city exercise due diligence in the future in awarding contracts to companies that are “untested and pose more than a reasonable risk,” citing Build Your Dreams – the Chinese company contracted to deliver at least 20 fully electric, 60-foot, articulated buses. The company maintains a manufacturing facility in California.

The BYD electric buses were originally scheduled for delivery last year, but so far the city has received only 15 of the 20, and the city plans to send some of those buses back after finding defects.

The report was also critical of the city’s procurement approach.

The city solicited offers using a “request for proposals” process and then selected contractors using an “Ad Hoc Advisory Committee,” commonly referred to as a selection or evaluation committee. The report found that the committees included high-level, city-appointed officials and deputy directors, rather than “more disinterested, but technically qualified” people, such as professors from local universities, members of city commissions and officials from county or state agencies that have similar services.

The report also went on to recommend that the city adopt stricter rules for contractors and vendors and consider replacing outdated and fragmented procurement rules spread across several departments.

The report disclosed concerns regarding ethics and impartiality in the contract administration process.

A senior official at BYD purchased at least one meal for almost all city inspectors and even twice for one inspector, according to the report.

The inspection also revealed that Bradbury Stamm, the construction manager, provided meals and other items free of charge to senior-level city officials, including an elected official and appointed official.

The inspection didn’t identify instances of fraud, but the report stated that “doesn’t mean fraud did not occur.”

The inspector general’s report recommends the city establish a more restrictive and clearer ethics code that also requires annual training and certifications signed by employees.

Recommendations also include involving the city’s Americans with Disabilities Act Advisory Council more frequently on capital improvement projects to ensure that federal ADA-related civil rights requirements are included.

The Journal reached out to former Mayor Richard Berry, who said he had not received a copy of the report to review as of late Thursday and could not comment on its contents.

Keller told the Journal last month that ART could begin interim operations in the fall with a limited route using fewer electric buses than originally planned. The entire nine-mile route – using a combination of the electric buses and compressed natural gas or clean diesel buses – could be in operation as soon as winter.

Keller said the city wants to amend the contract to reduce the number of buses it accepts from BYD due to the many delays and problems it has had with the company, and seek additional buses from another manufacturer.

According to the report, the city has paid $86.9 million to Bradbury Stamm Construction and $973,549 to HDR Engineering Inc. for architectural engineering services.

The contract amount with Build Your Dreams is about $23 million. The city is not obligated to pay BYD until all buses are delivered.

Key findings
• The city funded construction using general obligation bonds that taxpayers intended to be used for other projects. The city should avoid situations where there is unreasonable risk with using funds earmarked for other uses.• The city should minimize projects that do not have a grant agreement in place.• The city should exercise due diligence before awarding future contracts to companies that are untested and pose more than a reasonable risk.

• The city selected contractors using an “Ad Hoc Advisory Committee” that included high-level city officials instead of professors from local universities, members from city commissions and officials from county or state agencies that have similar services.

• City employees and contractor personnel should go to extreme lengths to avoid the appearance of biases, conflicts and partiality.